Cook’s underlying profits plunge

Thomas Cook’s UK business saw underlying profits tumble to £34.1 million in the year to September from £107.5 million the previous year.

The group, which reported an overall 2011 pre-tax loss of £398 million, said the UK results “reflect significant underperformance during a very difficult year”.

The underlying profit margin was down to just 1% from 3.4% in 2010. The UK generated revenue of £3.199 billion and a profit of just £19.5 million with operations in India and Egypt, which fall under the UK umbrella, generating the balance.

The impact of political unrest in the Middle East and North Africa cost £15.2 million in the UK.

“External trading conditions were tough as consumer sentiment deteriorated and we faced significant input cost increases, but these external factors were exacerbated by internal operating inefficiency and a lack of responsiveness,” Cook said.

Its tour operations suffered most from increased costs but failed to pass these on to customers due to price sensitivity, resulting from a combination of low consumer confidence and increased competitive pressure.

Mainstream holidaymakers carried rose by 1.5% to 3.7 million as short-haul capacity went up by 1.9% as people moved away from medium-haul travel due to the Arab Spring disruption.

Independent businesses had a “mixed year” with good growth for Hotels4U and its Essentials businesses, but Gold Medal suffered from margin and volume pressure in the face of “aggressive competition”.

The flight consolidator also suffered from “a decline in the effectiveness of key third party agents which was exacerbated by poor systems”.

Cook is embarking on an overhaul of its UK operations, including the closure of 200 loss-making shops, in an effort to improve profitability.

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